Microsoft buys Nokia’s phone business for $7.1 billion

Microsoft and Nokia announced today that Nokia's Devices & Services business—the part of the company that builds all Nokia's phones (both smart and otherwise)—is changing hands. Microsoft is paying €5.44 billion ($7.17 billion) for the struggling Nokia division. The deal, subject to shareholder and regulatory approval, is expected to close in the first quarter of 2014.

In the transaction, all of Nokia's device business, including design, manufacturing, sales, marketing, and support, becomes a part of Microsoft. This includes 32,000 staff, of which 4,700 are in Finland.

Remaining behind is Nokia Solutions and Networks (formerly Nokia Siemens Networks), which builds telecommunications equipment and mapping division HERE (Navteq). Nokia is also retaining its Advanced Technologies group, which develops and licenses intellectual property. These parts together account for about half of Nokia's revenue and approximately 24,000 staff.

Nokia CEO Stephen Elop—formerly of Microsoft—will be succeeded as Nokia CEO by Risto Siilasmaa. Elop will serve as Executive Vice President of Devices & Services, and Nokia expects that he will move to Microsoft once the deal is closed.

The headline €5.44 billion figure is split €3.79 billion ($4.99 billion) for Devices & Services and €1.65 billion ($2.17 billion) for a patent agreement. Under that agreement, Redmond is buying a ten-year license to Nokia's patents, with an option to make the ten-year agreement perpetual. Microsoft is also acquiring Nokia's various licenses to patents from Qualcomm, IBM, Motorola Mobility, and Motorola Solutions.

Additionally, and not as part of this transaction, Microsoft is licensing the HERE platform for four years. For HERE, this will substantially replace the internal cross-billing that currently occurs, and Microsoft will become one of HERE's top three customers.

Finally, Microsoft is obtaining a limited license to Nokia's brand names. The Lumia (smartphone) and Asha (featurephone) brands move to Microsoft. Redmond can continue to use the Nokia brand on all current products and can also use it for ten years on any products based on Nokia's Series 30 and Series 40 featurephone platforms. However, it appears that future smartphones will not be permitted to carry the Nokia brand.

Microsoft says that it will continue to license Windows Phone to other OEMs.

Redmond says that with the purchase, its gross margin on each Nokia phone will grow from less than $10 per unit to more than $40 per unit, with "synergies" saving about $600 million in costs each year, and that the deal should start contributing positively to earnings per share by the 2016 financial year. The deal will be financed with offshore cash (just as happened with the Skype purchase).

366 Reader Comments

I was preparing my self to buy shares in nokia this week. I've been thinking about it for months now . I'm new to all of this. Can anyone please tell me whether i got screwed by waiting or avoided a disaster?

Are you kidding? Nokia share price will likely go up 60-100% from here immediately and possibly much more in the long run if NSN and Here Maps continue to grow. Plus they retain much of their mobile patents. This deal finally unlocks the underlying value of the whole Nokia. Nokia gets rid a business segment that's been killing their earnings and adds a pile of cash.

This "unlocking" was bound to happen one way or another. It was just a matter of time.

What makesme angry is what Microsoft already did to Nokia.It's a piece of technology history that crumbled in the greedy hands of Microsoft.As an European fellow, I'm angry, disappointed and sad by this turn of events.

As an European, aren't you angry that Nokia sat on their asses for a number of years allowing their leadership in smartphones to slip away, before Microsoft was in the picture?

What makesme angry is what Microsoft already did to Nokia.It's a piece of technology history that crumbled in the greedy hands of Microsoft.As an European fellow, I'm angry, disappointed and sad by this turn of events.

As an European, aren't you angry that Nokia sat on their asses for a number of years allowing their leadership in smartphones to slip away, before Microsoft was in the picture?

Yes, that too. It was a blind and stupid move after all. But the signs were already clear."Take my money, but also take my man as CEO"? Oh, come on!

Nokia Corporation board approved Elop as CEO. Last I checked they are Finnish and Ballmer had no power in the decision.

They (almost) had no choice, they needed cash ready and Microsoft could give them all they needed.

So what should they have done instead? Taken a chance on Android?

Of course.They could have manifactured WP devices if they wanted, but Android would have been a totally legit move.Keep in mind that Nokia is still a strong brand in Europe, and could have rivalled Samsung.

I think this development pretty much confirms Elop was totally a mole for Microsoft. Reconnaissance on [Nokia] internals, broker the Symbian to Windows Phone transition on the flagships (Lumia line). Do a decent job selling feature phones to emerging markets (where Nokia is still strong) but make the new product vision in developed markets so obtuse that consumers will not bite and the stock price runs towards the ground. Nokia then becomes an affordable and sensible purchase for Microsoft's overall strategy of becoming both a hardware and software provider, as emerging markets will one day (after infrastructure improvements in developing countries) want to transition from their Asha feature phones to Lumia smartphones, and thus be introduced to their first smartphone (running Windows Phone, expanding the base of users for both Windows Phone OS and Microsoft Live services).

That's how Microsoft works—they don't think about what will turn their fortunes short-term—it's always long term—a decade from now. Look at Xbox.

The saddest part of all of this was that I was hoping for the day when Nokia would adopt Android for some of it's Lumia handsets. If Elop truly wanted Nokia to succeed, he would have allowed some of the products to run Android (but leave the flagship running WP to maintain obligations). Nokia's hardware is without equal in the mobile phone space (quality of build, battery life) but is crippled by running on a platform with a small developer base (nothing like Android). Now that Microsoft is going to purchase it, Android on Nokia seems like a total pipe dream.

Now the fabled "Reverse Midas Touch" of Microsoft will come into play. Have they ever bought a company and made the product BETTER and MORE SUCCESSFUL? Ever? I mean, I'm sure it has happened, but I sure can't think of any examples.

And what is more ironic is that all of this top US technology companies want to make mobile computer hardware and have no real interest in desktop hardware. IBM was the last one with their Thinkpad brand to make a decent laptop, besides Apple which I would buy if you could run Windows or Linux in their systems.

Excuse me? Ignoring all the good PC laptops out there, what the heck is up with your claim that you can't run Windows or Linux on Apple hardware? Apple actively supports running Windows via Boot Camp, and Linux developers work to get it to work on Apple hardware too.

Now the fabled "Reverse Midas Touch" of Microsoft will come into play. Have they ever bought a company and made the product BETTER and MORE SUCCESSFUL? Ever? I mean, I'm sure it has happened, but I sure can't think of any examples.

Not a single one as far as I know. The list of casualties goes on a mile long. Groove, Massive, LinkExchange, WebTV, Danger, aQuantive.

- the only company on the planet that actually did a reasonable attempt at pushing Windows Phone forward is now being bought and merged into the company which has repeatedly failed to execute on Windows Phone. Is there any way that could possibly end well?- the one *successful* brand name for Windows Phone devices is being thrown away

I don't think Apple and Google could have dreamt up a more accurate surgical strike to hurt Windows Phone if they'd tried. Take out the limited brand recognition it has achieved, and dissolve the one group which wasn't asleep at the wheel. (Say what you like about Elop's strategy, but once he'd decided on it, you can't fault Nokia's efforts to make it *work*. In a lot of ways they were let down by Microsoft not keeping up)

I'm not usually big on technology business predictions/speculation, but I'm pretty sure this is going to go downhill for Windows Phone. And that in a couple of years, Microsoft will be writing off at least a couple of the billions paid for Nokia.

Suppose this clear any doubts about Elop, also explains pretty much every move Nokia made during his reign.

I'm not sure myself how much sarcasm I included there but it's hard not getting cynical...

Nokia hired Elop. Their board would have heard his plan and then chosen him to be CEO. If nothing else, fear of a lawsuit would have forced them to look at options and then make a choice. Elop is no trojan horse...if the charge was incompetence then maybe but its a whole new debate.Whether going Android would have helped Nokia regain lost glory is debatable given that Motorola, htc and lg have failed. Android is a 1 company show with the majority of the market divided amongst many small players. Betting on WP was as good as

Main thing with Motorola was the patents. Microsoft is paying to license Nokia's, whereas Google owns Motorola's. This means that they can more readily engage in MAPS (Mutually Assured Patent Suits), and hopefully stave off any actual litigation in this way.

- the only company on the planet that actually did a reasonable attempt at pushing Windows Mobile forward is now being bought and merged into the company which has repeatedly failed to execute on Windows Mobile. Is there any way that could possibly end well?- the one *successful* brand name for Windows Mobile devices is being thrown away

I don't think Apple and Google could have dreamt up a more accurate surgical strike to hurt Windows Mobile if they'd tried. Take out the limited brand recognition it has achieved, and dissolve the one group which wasn't asleep at the wheel. (Say what you like about Elop's strategy, but once he'd decided on it, you can't fault Nokia's efforts to make it *work*. In a lot of ways they were let down by Microsoft not keeping up)

I'm not usually big on technology business predictions/speculation, but I'm pretty sure this is going to go downhill for Windows Mobile. And that in a couple of years, Microsoft will be writing off at least a couple of the billions paid for Nokia.

Now the fabled "Reverse Midas Touch" of Microsoft will come into play. Have they ever bought a company and made the product BETTER and MORE SUCCESSFUL? Ever? I mean, I'm sure it has happened, but I sure can't think of any examples.

In 1987, they bought Forethought, which eventually lead to PowerPoint. PP is definitely an important part of MS's software offering, although the over 25 years since makes it hard to say it was better/worse. Certainly more successful, though.

In 1997, they bought Hotmail. That was a very well-timed purchase, if nothing else.

In 2000, they added another company (Visio) whose products were incorporated into the money fountain known as Office.

Also in 2000, they acquired Bungie, the company that definitively made the Xbox. Without Halo: CE, nobody buys that thing. It goes the way of the Pippin, and Western companies probably never make another serious effort to enter the console gaming world.

- the only company on the planet that actually did a reasonable attempt at pushing Windows Mobile forward is now being bought and merged into the company which has repeatedly failed to execute on Windows Mobile. Is there any way that could possibly end well?- the one *successful* brand name for Windows Mobile devices is being thrown away

I don't think Apple and Google could have dreamt up a more accurate surgical strike to hurt Windows Mobile if they'd tried. Take out the limited brand recognition it has achieved, and dissolve the one group which wasn't asleep at the wheel. (Say what you like about Elop's strategy, but once he'd decided on it, you can't fault Nokia's efforts to make it *work*. In a lot of ways they were let down by Microsoft not keeping up)

I'm not usually big on technology business predictions/speculation, but I'm pretty sure this is going to go downhill for Windows Mobile. And that in a couple of years, Microsoft will be writing off at least a couple of the billions paid for Nokia.

Now the fabled "Reverse Midas Touch" of Microsoft will come into play. Have they ever bought a company and made the product BETTER and MORE SUCCESSFUL? Ever? I mean, I'm sure it has happened, but I sure can't think of any examples.

In 1987, they bought Forethought, which eventually lead to PowerPoint. PP is definitely an important part of MS's software offering, although the over 25 years since makes it hard to say it was better/worse. Certainly more successful, though.

In 1997, they bought Hotmail. That was a very well-timed purchase, if nothing else.

In 2000, they added another company (Visio) whose products were incorporated into the money fountain known as Office.

Also in 2000, they acquired Bungie, the company that definitively made the Xbox. Without Halo: CE, nobody buys that thing. It goes the way of the Pippin, and Western companies probably never make another serious effort to enter the console gaming world.

There's also Dynamics . Previously their largest European division which now makes a billion dollars a year.

Now the fabled "Reverse Midas Touch" of Microsoft will come into play. Have they ever bought a company and made the product BETTER and MORE SUCCESSFUL? Ever? I mean, I'm sure it has happened, but I sure can't think of any examples.

In 1987, they bought Forethought, which eventually lead to PowerPoint. PP is definitely an important part of MS's software offering, although the over 25 years since makes it hard to say it was better/worse. Certainly more successful, though.

In 1997, they bought Hotmail. That was a very well-timed purchase, if nothing else.

In 2000, they added another company (Visio) whose products were incorporated into the money fountain known as Office.

Also in 2000, they acquired Bungie, the company that definitively made the Xbox. Without Halo: CE, nobody buys that thing. It goes the way of the Pippin, and Western companies probably never make another serious effort to enter the console gaming world.

Yet to date XBox is billions in the hole. One could argue that if you can't get to positive ROI within 5 years of release, than its' a failure and should be cancelled. Apple spent $1 billion to bring the first batch of iPhones to market. The recouped that entire investment within several months, not years. They are +$89-$90 billion ROI on iPhone over the last 10 years(counting from the beginning of research). That's the ultimate measuring stick in performance today.

Now the fabled "Reverse Midas Touch" of Microsoft will come into play. Have they ever bought a company and made the product BETTER and MORE SUCCESSFUL? Ever? I mean, I'm sure it has happened, but I sure can't think of any examples.

In 1987, they bought Forethought, which eventually lead to PowerPoint. PP is definitely an important part of MS's software offering, although the over 25 years since makes it hard to say it was better/worse. Certainly more successful, though.

In 1997, they bought Hotmail. That was a very well-timed purchase, if nothing else.

In 2000, they added another company (Visio) whose products were incorporated into the money fountain known as Office.

Also in 2000, they acquired Bungie, the company that definitively made the Xbox. Without Halo: CE, nobody buys that thing. It goes the way of the Pippin, and Western companies probably never make another serious effort to enter the console gaming world.

There's also Dynamics . Previously their largest European division which now makes a billion dollars a year.

Visio 2013 is the best version yet. Just using for 15 minutes so far, but a sheer pleasure compared to any previous version. Microsoft has some really talented software designers. I hope they don't stack rank them out.

How is the Xbox billions in the hole? Are you totally ignoring the profits from selling actual games, where almost all the revenue comes from?

Any analyst has estimated total ROI at negative $3 billion to date. Compare that with Apple at positive $90 billion on iPhone alone. That's 90:1 ROI for a friggen phone. Unbelievable, historic, astonishing, amazing. I am running out of superlatives.

How is the Xbox billions in the hole? Are you totally ignoring the profits from selling actual games, where almost all the revenue comes from?

Any analyst has estimated total ROI at negative $3 billion to date. Compare that with Apple at positive $90 billion on iPhone alone. That's 90:1 ROI for a friggen phone. Unbelievable, historic, astonishing, amazing. I am running out of superlatives.

And they re-used the iPhone work for the iPad, so the ROI for that is probably even higher.

What makes it funny is that more than 10 years ago, when Microsoft originally made a tablet version of Windows OS, the head of the group developing Office told the OS group: Fuck off, we won't make ANY changes to Office to make it work better on the tablet [things like having the on-screen keyboard show/hide as appropriate, for example]. So, the OS had to jump through hoops to make it kind of work, but it sucked.

And that was Bill's baby, where he saw the industry going [I guess, having seen the Newton], and he LET the Office group screw it up.

A tightly integrated Skype plus Nokia built smartphone that enables wifi calling in an effective manner allowing me to wifi call other Nokias at a touch of the screen and hopefully any other smartphone with the Skype app installed (some manufacturers won't play along, I doubt Apple will want to anger its phone provider partners).

Oh to break the hold of phone companies and force them to charge decent prices for their services.

Interesting that it looks like future products will not have Nokia branding, and may just be called Microsoft Windows Phone

See slide 10 of the Microsoft presentation that was posted up earlier.The heading is "One Brand, United Voice" and it contains images of Lumia phones with ALL Nokia branding removed. Surely that was a deliberate action when creating that slide.(Although the phones on slide 11 do have Nokia branding)

For many markets (certainly here in Europe) the Nokia name is well known, and well trusted - certainly more so than than the Microsoft name.

Most people have had a Nokia phone in the past, and for those who bought / are about to buy their first smartphone the Nokia name is a familiar entry into a new world - this has surely helped Windows Phone's market share.These people are buying Lumias because of the Nokia name, not because of the Microsoft name.I doubt that many even know or care that Microsoft is involved in the new Nokias.

So to drop the Nokia brand (or to fail to license it) could be a mistake.

Finally is funny Elop is being speculated as a Ballmer replacement - first time as CEO he sold off Macromedia, 2nd time as CEO he sold off Nokia, now question must be asked for the 3rd time as CEO, who is he going to sell Microsoft to?

So the dream of a European smartphone running Android will never come true.

There's a bunch of finns building a phone called Jolla. Not strictly speaking Android OS, but as far as I know it's linux-based and supports Android apps.

It's so far removed from Android you should turn in your geek card. Jolla is MeeGo, but they lost two years being let off from Nokia and building a new company, and they lost access to the N9's UI. Two years in Mobile is an eternity, so I'd say they're doomed, especially if they don't launch a hackerphone with physical keyboard to catch the N900 owners. Those USB ports aren't going to last forever.

The same system Jolla has for Android app compatibility could have been applied to the N9. Besides, the N9 can dual-boot Jelly Bean (NITDroid).